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bigduckontax
bigduckontax, Accountant
Category: Tax
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I own, privately, a piece of land pedestrian and vehicular

Customer Question

I own, privately, a piece of land over which I wish to grant pedestrian and vehicular passage as my contribution to a hotel Joint Venture. The land will not be transferred to any other entity and I expect to charge, by contract, an annual or monthly fee to the other Joint Venture party (the hotel development company) on which I expect to pay the appropriate income tax. On completion of this transaction, as envisaged, are there implications concerning SDLT, CGT or any other taxation liabilities which I should need to consider?

Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.
Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. I see that you have grasped the fact that any fees paid pursuant to the grant of the Right of Way is liable to income tax in your hands. SDLT does not kick in until the consideration exceeds 40K so I think that matter can be ignored. Remember that if this land is situated in Scotland there is no SDLT but, under devolved powers, Land and Buildings Transfer Tax. As this is a non residential land and property the tax does not kick in until consideration exceeds 150K. There are no CGT implications in this matter. I do hope that my reply has been of assistance.
Customer: replied 1 year ago.

Hi Keith. Thank you for your response.

I had earlier received some informal advice which I hoped your professional reply might clarify. Previously, I had considered a lease only to be told that would be a "deemed capital gains tax disposal" for consideration equal to the open market value of the lease. This value

would be determined having regard to the original cost of the land, the current land valuation and the amount of income to be derived throughout the lifetime of the lease. Quite unfair. SDLT would be chargeable also based on the market value of the lease at up to 4%. I had hoped that a JV might be more straightforward. Can you kindly please confirm (or otherwise) that the same HMRC rules would be applied to a JV agreement as to a lease as described above. Many thanks in anticipation. Alan Drake.

Expert:  bigduckontax replied 1 year ago.
Whilst that advice was technically correct, the grant of a Right of Way is not a legal disposal of land, merely the grant of an easement. It is not a lease at all. Indeed some such granted can be imposed on a landowner as an easement of necessity. The value of such an easement is negligible and thus well below stamp duty or equivalent levels. Please be so kind as to rate me before you leave the Just Answer site..
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Expert:  bigduckontax replied 1 year ago.
Thank you for your excellent support.

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